It seems that Standard & Poor’s only needs to sneeze and Indian markets catch a cold.

On Wednesday, S&P simply reiterated in a regular report its concerns over India’s large fiscal and budget deficits – a concern that first raised headlines in April when the ratings agency warned the nation’s sovereign rating could be downgraded to junk status.

The fact that this was old news didn’t stop it hurting India’s securities and currency markets, where participants appear to have forgotten that the few rounds of economic overhauls unveiled in recent weeks have not overnight plugged the hole in India’s twin deficits.

India’s rupee currency is up over 4% against the U.S. dollar and stocks 3% since mid-September, when New Delhi unveiled sweeping economic reforms, including hiking state-subsidized diesel prices and allowing foreign supermarkets to open here for the first time. The aim is to boost investment, narrow the trade deficit and push the country away from relying on government pump-priming spending as its major economic engine.

The modest upward trajectory in stocks and the currency comes after months of weakness, especially following S&P’s April warning. The rupee earlier this year touched all-time lows.

The government’s overhauls, while significant, are unlikely to change India’s macroeconomic imbalances in the short term. Foreign capital won’t start flowing for years into newly-liberalized sectors. Meanwhile, India’s government remains reliant on expensive imported oil at a time when its exports are sagging and is committed to multi-billion-dollar welfare spending programs in the near term that’ll stress its budget.

S&P’s report today – “Eurozone Situation Is Still A Main Threat To Asia-Pacific Sovereigns In The Coming Year” – merely restated what everyone knows. In response, the rupee fell to 53.13 against the dollar, its lowest level in two weeks. The Bombay Stock Exchange’s benchmark Sensitive Index dropped to an intraday low of 18,645.16, down 0.8% from its previous close.

Economists say the reaction is a reminder of the nervousness in the market, where participants have been keen to see the positive in the government’s reform moves but know deep down that New Delhi will likely have to take tougher, politically-unpopular measures to further cut subsidies on fuel and fertilizer before the deficits are under control.

“This is a reminder to all of us,” said Ajay Shah, an economics professor at the New Delhi-based National Institute for Public Finance and Policy. “Fiscal progress that’s been made is quite limited. An S&P downgrade is going to hurt.”

S&P, for its part, appeared flummoxed by the market reaction to its report and put out a clarification.

“Please note that we didn’t issue or announce anything on India sovereign ratings today,” the ratings agency said. “We simply published our regular Asia-Pacific sovereign report card which doesn’t have any new information on India’s rating.”

Imagine what market chaos will ensue if S&P actually cuts India’s rating to below investment grade rather than restate decisions made six months ago.